NCLAT Upholds Validity of Section 8 Notice Served on Registered Email; Dismisses Appeal Against Admission of CIRP
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson), Mr. Barun Mitra (Technical Member), and Mr. Arun Baroka (Technical Member), dismissed an appeal filed by the suspended director of M/s Rameshwar Textile Mills Pvt. Ltd., challenging the admission of a Section 9 application by the NCLT Mumbai. The Tribunal held that a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016, served on the corporate debtor’s registered email address, as disclosed in the Ministry of Corporate Affairs (MCA) records, is sufficient to fulfill the statutory requirement of service.
Background
The matter arose from a commercial arrangement wherein S.R. Garments had contracted with the Government of Uttar Pradesh for the supply of socks. M/s Rameshwar Textile Mills Pvt. Ltd. (the Corporate Debtor) subcontracted the work to Sadhna Dye Chem (Operational Creditor), who in turn engaged AOV Clever Knit LLP as a downstream subcontractor. The Operational Creditor supplied socks and raised six invoices totaling ₹1,65,97,750. On non-payment, a demand notice under Section 8 of the Code was issued via speed post on 24.04.2023, but delivery failed. The Operational Creditor then served the notice via email on 02.05.2023 to the email address r******@gmail.com, which was the address registered in the Corporate Debtor’s Company Master Data.
Subsequently, on 07.07.2023, the Operational Creditor filed a Section 9 application for an operational debt of ₹4,29,14,887, which included interest charges of ₹2.63 crore. The Adjudicating Authority issued notices of hearing, which were also sent to the same registered email ID. However, the Corporate Debtor did not appear on multiple dates—12.09.2023, 16.10.2023, and 22.11.2023. Eventually, the matter was heard ex-parte and the Corporate Insolvency Resolution Process (CIRP) was initiated. Aggrieved by the ex-parte admission, the suspended director filed the appeal before the NCLAT.
Appellant's Contentions
The appellant argued that the Section 9 application was admitted without proper service of the demand notice, violating the principles of natural justice. It was submitted that the registered email address used was non-functional since July 2021, after the employee who managed it had left the company. The appellant contended that no substituted service (such as newspaper publication) was attempted and cited Sunil Sanghavi v. Cytech Coatings Pvt. Ltd [CA(AT)(Ins) No. 635 of 2018] and Shailendra Sharma v. Ercon Composite [CA(AT)(Ins) No. 159 of 2020] to assert that valid service of notice is a mandatory prerequisite under Section 8.
Further, the appellant claimed that a pre-existing dispute existed regarding defective supply of socks and asserted that payments were made to Clever Knit on the instructions of the Operational Creditor, which should have been considered by the Adjudicating Authority.
Respondent's Submissions
The Operational Creditor refuted the claims, arguing that the registered email ID used for communication was the same as that recorded in the Company Master Data, Form MGT-7 for FY 2020–21, and even a Board Resolution dated 30.11.2021. It was contended that the Corporate Debtor continued to use this email ID even after the departure of the employee managing it. Thus, any claim of non-service was a deliberate attempt to evade the CIRP.
With respect to the alleged pre-existing dispute, the Operational Creditor argued that the invoices forming the subject matter of the Section 9 petition had no link with the older claims of defective supply and that the Corporate Debtor continued making payments even after such disputes allegedly arose—undermining the credibility of their defense.
Tribunal's Observations
The NCLAT found no merit in the appellant’s assertion that the demand notice was not validly served. It held that service of the Section 8 notice to the registered email address of the Corporate Debtor—especially when that email address was consistently reflected in multiple publicly available documents—constituted valid service under law. The Tribunal emphasized: “The Corporate Debtor was clearly bound by the representation made by them to the world at large about their registered email address having placed the same on the public domain.”
It also referred to earlier decisions in Naresh Kumar Aggarwal v. CFM Asset Reconstruction Pvt. Ltd [CA(AT)(Ins) No. 736 of 2022] and Rajnish Gupta v. Union Bank of India [CA (AT) (Ins) No. 351 of 2021], where service by email to the registered MCA address was upheld as valid.
On the issue of pre-existing dispute, the Tribunal rejected the appellant’s claims, noting that no debit notes had been issued, no evidence was presented to support the claim that payments to Clever Knit were authorized by the Operational Creditor, and payments had continued to be made in December 2021—long after the purported dispute arose in July 2018. Applying the principles from Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd [(2018) 1 SCC 353], the NCLAT held that the alleged dispute was “a moonshine defence” unsupported by any credible record.
Verdict
The NCLAT concluded that the Section 8 demand notice was duly served via email to the registered email address, satisfying the statutory requirement. There was no violation of natural justice, and the claim of pre-existing dispute was found to be insubstantial and illusory. Finding no merit in the appeal, the Tribunal upheld the admission of the Section 9 application and dismissed the appeal.
Appearance
For Appellant: Mr. Palash S. Singhai, Mr. Pragya Prakash Upadhyay and Mr. Harshal Sareen, Advocates.
For Respondent: Mr. Gaurav Mitra, Sr. Advocate, Mr. Ravi Raghunath and Ms. Aarushi Mishra, Advocates for R-2.
Cause Title: Vinita Pramod Devkar V. Shri Kailash Shah and Anr.
Case No: Company Appeal (AT) (Insolvency) No. 364 of 2024
Coram: Justice Ashok Bhushan [Chairperson] , Mr. Arun Baroka [Member (Technical)], Mr. Barun Mitra [Member (Technical)]
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